One of the most basic estate planning questions people ask is: “Which is better, a will or living trust?” Or, having the impression that a living trust is more sophisticated or more expensive, they ask, “Do I need a trust, or is a will enough?”

Let me dispense with a minor point first: How does each address you becoming disabled?

A will does nothing during life. Even in the Bible, Hebrews 9:16-17 tells us, “In the case of a will, it is necessary to prove the death of the one who made it, because a will is in force only when somebody has died; it never takes effect while the one who made it is living.” By contrast, a living trust can control how your property is managed for you during your disability, and it can do this with greater specificity and privacy than a power of attorney.

But when it comes to disposing of your property on death, is a will or living trust better? Before answering that question, you need to ask this: “Do I want to provide benefits to my heirs beyond my death, or merely get my estate into their name?”

More benefits

What benefits might you provide your heirs beyond just giving them the estate? One benefit is minimizing estate taxes: “If I predecease my spouse, put enough of my estate in trust for my spouse to use my estate tax exemption.” Another would be asset protection for your heirs: “Divide my estate into separate trusts for my children, where each child has control of their share, but the inheritance will remain protected from threats like lawsuit or divorce.” Perhaps on death your estate should go in trusts for minors or heirs with life challenges such as disabilities or addictions. Other benefits could be giving a successor-farmer preferred rights to lease the ground from the others, dividing property unequally, and giving special purchase options or rights.

So, do you want to provide such benefits to your heirs, or merely get your estate into their name? If the latter, it won’t make much difference whether you use a will or living trust. You can set up asset ownership so most property ignores the will or trust. Name heirs as “transfer on death” beneficiaries or joint owners with rights of survivorship. Just be sure to leave a modest amount of cash to pass under the will or trust so your executor can pay your final expenses.

“Will or living trust?” becomes more relevant if you want to provide ongoing benefits to your heirs. These added benefits are best achieved by one or more trusts: not the living trust, but a trust that takes effect upon your death. The examples already mentioned include a tax-planning trust for spouse, asset protection trusts for adult children, minor or special needs trusts for those heirs, and farm preservation trusts, each taking effect upon your death. So, is a living trust or will better for creating these ongoing trusts?

No difference:

The difference:

There are many technical steps that have to be taken to administer your living trust on death, largely parallel to taking your will through probate. The living trust won’t require court, and staying out of court will reduce the professional fees. The legal fees to administer your living trust should be significantly less than the legal fees when probating the will.

On the whole, living trusts cost less and do more in the long run.